EU proposes one-off $140 billion tax on energy companies
By Anna Cooban, CNN Business
The European Union wants to raise 140 billion euros ($140 billion) by tapping the windfall profits of some energy companies to help households and businesses pay sky-high gas and electricity bills.
On Wednesday, the European Commission proposed capping the profits of renewable and nuclear power generators, and taxing the windfall profits of oil and gas companies.
Profits for power generators using wind, solar and nuclear power have soared because their rates are tied to the wholesale price of natural gas, which hit a record high in March after Russia invaded Ukraine, and is now about 550% higher than a year ago.
Europe sanctioned Russian oil and coal exports after the invasion, prompting Moscow to cut gas supplies in return.
European Commission President Ursula von der Leyen said on Wednesday the bloc would carry out a “deep and comprehensive reform” to decouple the cost of gas from the price of electricity.
“These companies are making revenue that they never accounted for, that they never even dreamed of,” she told EU lawmakers during a speech in Strasbourg, France. “It is a mistake to collect extraordinary record profits for the benefit of war and on the backs of consumers,” she added.
The Commission’s proposals still need to be debated and adopted by EU Member States.
The bloc could introduce a cap of €180 ($180) per megawatt-hour on electricity produced by renewable energy companies, the Commission said in a statement.. The benchmark wholesale gas price in Europe is currently €212 ($212) per megawatt hour.
Natural gas and oil prices have started rising last year as countries reopened their pandemic lockdowns, prompting a surge in demand. But Russia’s invasion of Ukraine in late February – and the resulting energy standoff between Europe and Moscow – blew them up. Oil has since retreated as a global economic slowdown leads to reduced demand, but natural gas prices remain above their March peak.
The EU proposal is part of a package of measures to help the region overcome the energy crisis this winter, when temperatures drop and demand normally increases.
The package includes a “crisis contribution” from oil, gas and coal producers, who have reaped equally huge profits, and mandatory targets for countries to reduce their electricity consumption during peak hours.
The Commission said in its statement that EU member states should levy an additional tax on all profits that exceed the average earnings of the last three years by more than 20%. He did not specify the tax rate.
“They have to pay a fair share,” von der Leyen said.
She also said that billions of national governments have already pledged supporting consumers would “not” be enough on its own.
Together, European countries and the UK – which is mired in its own energy crisis – have so far pledged around 500 billion euros ($500 billion) in grants to help households and businesses cope. to soaring energy bills.
The UK imposed a 25% windfall tax on its oil and gas companies earlier this year to help pay for a first round of relief for customers this year.
But Prime Minister Liz Truss has ruled out raising or extending the tax to help fund her much bolder plan to cap household bills at £2,500 ($2,888) a year for the next two years and support businesses over the next six months. Analysts say these measures could cost up to £150 billion ($173 billion).
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